IMPLEMENTATION

RUBBERTEX

OF

BANK

INCORPORATED

MANUFACTURING

RECONCILATION

IN

RUBBERBOOTS

CORPORATION

FASHION
IN

VALENCIA

MALAYBALAY

CITY

BUKIDNON.

INTRODUCTION
Every business owner or management should have knowledge of
cash book and pass book as from these books, he may check how much
balance is available to him for meeting his expenses and liabilities and
what are the details of receipts and payments of a particular period. With
the details of payments it can be checked that whether the payments are
of reasonable amount or not. If the expanses are unreasonably high he
may take steps to control them. The company management who regularly
checks his cash and bank balances would never face problems like
dishonor of checks or cash crisis etc. Busniess owner, who doesnt
distinguish between his revenue and profits, may spend all his receipts for
his personal purposes subsequently resulting in deficiency of cash for
business purposes and lead to cash crisis.
An company owner doesnt know more about internal control over
cash and other asset. For example, the potential for employee dishonesty
is the most common type of business theft, increases when one or more
employees have too much control over cash or other vulnerable assets
concurrently

with

control

over

accounting

functions.

Hence,

bank

reconciliation is important that it may uncover irregularities such as

employee theft of funds as mentioned. Furthermore, performing bank
reconciliation is necessary for the accuracy of the accounting records and
for the company's financial statements. Bank reconciliations are also
associated with a company's internal controls over cash. If the bank
reconciliation is performed by someone other than the authorized check

Page 1

signers and record keepers, the company has improved its internal control
over cash.
By implementing basic internal controls and maintaining strong
personal oversight of the accounting functions, business owner can
minimize the opportunities for an employee theft to occur.
Cash will always be a high-risk area of vulnerability when it comes
to fraud. Temptations are great, and controls are often insufficient leading
to an abundance of opportunity for would-be fraudsters. Stringent
controls must be in place and deployed to mitigate the risk of loss.
However, there must be diligent oversight for controls to be effective. It is
imperative for todays anti-fraud professional to understand how to
implement a proper cash control system and monitor its success.
Fraud is a risk that all businesses face. Fraud on cash item, as it
mentioned is the most susceptible account because it can easily transfer
hand by hand and considering it is most liquid asset. It does not matter
whether the business is large or small, they both face significant risks of
loss due to fraud. Fraud can occur internally, externally, or in combination.
Many fraud experts believe the most important thing a business can do to
try and minimize its risk of loss due to fraud is to design internal controls
that make it difficult to commit or conceal fraud.
In view of the above scenario, there must be robust processes in
place for cash receipts and disbursements. All cash processes, manual or
automated, must meet their objectives to (1) safeguard the asset most
especially cash and (2) prevent, deter, and detect errors and fraud. To
achieve these objectives, the organization must ensure receipts and
disbursements are appropriately directed and recorded because this
normally involved cash.
This study emphasizes the importance of bank reconciliation as a
very important part of cash control procedures to be implemented to a
private manufacturing corporation here in Malaybalay City, Bukidnon. This
manufacturing company is no other than the Japanese owned corporation
named,

VALENCIA RUBBERTEX INCORPORATED.

Page 2

Valencia Rubbertex

Incorporated is a member company of Rikio Co., Ltd., one of the top

manufacturer of Japanese style shoes holding an impressive 70% of
Japan market and manufacturing of rubber boots and safety sneaker. In
the middle of 1970, with the increasing transformation of Taiwan and
Korea into advancing countries. There was a rapid increase in labor cost,
thereby the business viability has been greatly affected. To be more
conservative, the Rikio management rendered its wise decision to
withdraw from Taiwan and Korea and seek alternative bases of operation
in China and Philippines. Until such time that during 1993, they begun to
conduct their study to put up their company in Malaybalay City, Bukidnon
and eventually they finally put up their business.
The company is a domestic corporation registered with the
Securities and Exchange Commission (SEC) on September 23, 1994. Its
primary purpose is to manufacture and export footwear, components and
parts thereof, and to procure and to import, to the extent allowed by law,
the raw materials and accessories necessary therefore.
On June 18, 1996, the Board of Investment (BOI) approved the
companys application for revision of project timetable from July 1996 to
November 1997 due to the delay in the actual start of its commercial
operations. The company formally stated its commercial operations in
March 1997 for working shoes and in June 1997 for rubber boots and at
present fashion rubberboots are being manufacturing. It has a registered
production capacity of one million two hundred thousand (1,200,000)
pairs per year. At present, there are 263 total employees which includes
management, administrative staff, engineering and production workers.
PROPONENT
The proponent of this study was born in Malaybalay City, Bukidnon,
on April 29, 1985 with both parents a native from Bohol. He is happily
married with no child yet. He learned from his parent the value of honesty

Page 3

in every undertaking he do and most especially being honest towards

others and to his workplace.
The proponent is a Certified Public Accountant, which he passed last
May 2010. His first job was a part time college instructor at San Isidro
College in Malaybalay City, teaching accounting, taxation, financial
management and auditing subjects. On October 2010, he was employed
as an internal auditor of Valencia Rubbertex Inc. a Japanese owned
manufacturing

company

making

fashion

rubber

boots

for

import

purposes. An opportunity comes last January 2013, when he was

employed in the Province of Bukidnon at Provincial Accountants Office. At
present he was still connected at the above-mentioned government office.
During his college days as an accountancy student, his favorite
subject was auditing. Probably thats the reason why he garnered high
rating in his auditing subject during his licensure exam for certified public
accountant because he simply love his subject. Being an accountant, he
really interested most in auditing and internal audit, rather in accounting
or management accounting.
The proponent dream to be a Certified Internal Auditor (CIA)
someday, a certification recognized internationally. Aside from that,
various and advance auditing techniques will be learned and eventually
will be applied in actual practice. Having this knowledge, he can impart
the value of advance internal auditing to every organization, whether
private or public, in order to help them effectively and efficiently
discharge its duties to achieve its objectives.
RATIONALE
The proponent is once an employee of the said corporation having
work for them as internal auditor. As an internal auditor of such company,
He have familiarized their transaction both financial aspect and even nonfinancial, such as their operation in production area. But his primarily task
is to see to it that effective control are being implemented and set by the
Page 4

company management. A thorough evaluation has been conducted by the

proponent but sadly, the internal control of the company is very weak,
especially the control over cash. This weakness of control over cash is his
primary findings. The reason he can say that its control is very weak
because the cashier is the one who records the cash transaction as well as
in custody of the company cash. Upon verifying the documents, he found
out a lot of error in recording such as transposition error, error in
transplacement and error in omission. If bank reconciliation has been
performed, then the above error will surely be eliminated because
through bank reconciliation, those errors will be tracked and correcting or
adjusting entries will be made pertaining to those errors.
A verification of company collection has been conducted but the
time frame of collection or receipt as against its time of immediate deposit
creates a longer interval, which meant that the collections are not
immediately deposited by the cashier. In addition, unrecorded transaction
or error of omission has been the usual scenario but the usual excuse is
the factor of being busy transacting in company authorized bank thats
why recording of transaction has been forgotten. In performing bank
reconciliation, the person in-charged with the recording will be timely
monitored thereby minimizing the error of omission.
The proponent emphasizes the importance of performing bank
reconciliation to Valencia Rubbertex Incorporated to help the company not
to expose to business risk. To prevent fraud committed by employees as
well as management fraud and to protect the asset especially cash.
Having control over a large amount of cash is tempting; knowing there is
no oversight is inviting. It is fraud in the making, therefore bank
reconciliation can somehow detect fraud as a tool for internal control.
Moreover, the management entrusted by the owner can track daily cash
using bank reconciliations, allowing them to determine the amount that is
needed for the day's activities. The company may also draw money from
credit lines to fund daily operations based on their cash flow situation, this
can be done through bank reconciliation because actual cash is
Page 5

determined in using this tool. Bank reconciliations provide daily accuracy

by providing the amount of cash on-hand and what transactions have
occurred for that day. The reconciliations also show what items are
outstanding and will clear the bank in coming days, allowing the
management to calculate draws on the credit line.
GENERAL OBJECTIVES
One of the best defenses against business failure, as well as an
important driver of business performance, is having an effective internal
control system on cash through performing bank reconciliation, which
manages risk on company cash aspect and enables the creation and
preservation of value. Successful organizations know how to take
advantage of opportunities and counter threats, in many instances
through effective application of internal controls, and therefore improve
their performance.
It is prepared from time to time to check that all transactions
relating to bank are properly recorded by the business in the bank column
of the cash book and by the bank in its ledger account. Thus, it is
prepared to reconcile the bank balances shown by the cash book and by
the bank statement. It helps in detecting, if there is any error in recording
the transactions and ascertaining the correct bank balance on a particular
date.
The proponent after going through this study should be able to
emphasized and eventually implement the bank reconciliation as a useful
tool for cash internal control to be adopted by the management of
Valencia Rubbertex Incorporated. The aim of this study is to help Valencia
Rubbertex Incorporated to:
1. Know and understand the meaning of bank reconciliation as a
whole.

Page 6

2. Know the importance of bank reconciliation in their accounting and

finance department to:
Detecting Fraud
Prevents overdraft
Identifies book error
Identifies bank error
Improves collection action
track of checks that are cashed,
Identify outstanding checks or deposit in transit
Identify the correct available cash
3. To have a more reliable financial records and financial statements
4. To help implement the bank reconciliation system in their respective
accounting department.
METHODOLOGY
In implementation and execution of this very important tool of
internal control system over cash, the proponent is to conduct lecture or
seminar or a one on one discussion on how to commence the
implementation and preparation of bank reconciliation to the management
of Valencia Rubbertex Incorporated, in particular to their accounting
department.
1. Seminar

to

be

conducted

with

the

accounting

and

finance

department for giving and discussing information on what is bank

reconciliation as a whole. The course of the seminar includes:
What is bank reconciliation
Importance of bank reconciliation
Book reconciling items
Bank reconciling items
Effects of unrecorded deposits
Effects of unrecorded disbursement
Tracking of receipts and disbursement
2. One on one discussion with the Accounting Manager as an overall
in-charge in the accounting department. The primary purpose of
one on one discussion is to:
Page 7

 Discuss the effects of error in the accounting books of

account.
The effect of bank reconciliation to the reliability on financial
statement.
How to implement and perform the bank reconciliation
3. One on one discussion with the Finance Manager as an overall incharge with the finance department. The purpose of discussion is
to:
Improves collection action
track of checks that are cashed,
Identify outstanding checks or deposit in transit
Identify the correct available cash
Detects overdraft
Track the receipt and disbursement of the company
4. One on one discussion with the internal auditor as in-charged with
the evaluation of internal control and if control is in place. The end
result of this discussion is to:
Note the nature of the reconciling items captured by the bank
reconciliation. The internal auditor will give his findings and
recommendation in connection with the reconciling items
noted.
5. One on one discussion with the General Manager as an overall incharge of the Corporation.
Importance of bank reconciliation as an internal control over
cash.
There is a need to implement the bank reconciliation system.

BENEFICIARIES
The outcome of this study is envisioned to benefit the following:
Accounting Department and its personnel (accounting manager,
accounting supervisor, accounting staff and others)
The purpose of this department is to have the record of receipt and
expenditures of its daily activities. Also accounting department makes it
Page 8

available for the business owners or management to assess and analyzed

the business performance. This will help the owner to decide what
improvements they need to make or what practices to keep doing in order
to keep the company at its successful place. In order to do all business
transactions accounting is necessary because this department is the
source of financial data and records whereby owners will be making its
decisions and the assess the performance of the company. Thus, this
department is important for the accomplishment of financial information
that is primarily financial in nature to be intended for making economic
decision. The financial records and financial statements is the primary
output of this department.
Finance Department (Finance manager and its staff)
The role of a finance department in any type of organization is to
ensure that adequate funds are for the resources that are required to help
achieve the organizational objectives. The department also ensures that
the costs are controlled, that there is an adequate cash flow, and also
that it establishes and further controls all profitable levels. All of which are
extremely important to the running of any organization.

Without any

form of financial control, the company would be unable to control the

inward and outward flow of cash and in terms of utilizing the cash,
without the finance department, there would be very little knowledge or
direction as to where the company can invest and how much they can
invest.
One of the major roles of the finance department is to identify
appropriate financial information prior to communicating this information
to managers and decision-makers, so that they can make informed
judgments and decisions that will benefit the company or organization.
The finance department further prepares financial documents and final
accounts for managers to use and for reporting purposes.

Page 9

Internal Auditor
Internal auditor ensures accurate and appropriate accounting
records, which are essential for directors and managers to decide on
operational results how to make adjustments when necessary in their
operations. Internal auditing is when a company checks out its own books
to make sure everything is correct.
General Manager
The general manager is responsible for all areas. He has the overall
responsibility for managing both the revenue and cost elements of a
companys

operation.

responsibility.

He

is

This

is

often

usually

referred

oversees

firm's marketing and sales functions

as

to

as

profit

&

loss

most

or

all

of

the

well

as

the

day-to-

day operations of the business. Frequently, the General Manager is

responsible for effective planning, delegating, coordinating, staffing,
organizing, and decision making to attain desirable profit making results
for an organization.
The Corporation
Valencia Rubbertex Incorporated will benefit the advantage of
employing bank reconciliation as a tool of internal control.
Employees
The objective of business owners is profitability. The organization's
success depends on employees' performance; poor performance is
detrimental to company's success. Every business owner wants to see
their company succeed, and there are many factors that help this happen.
However, one of the most crucial parts of any business is its employees.
Employees of a business are the ones who are making the business work,
making it successful.
Page 10

Preparing bank reconciliation will achieve the following

benefits and advantages towards above mentioned beneficiaries:

1. Bank reconciliations may uncover differences that may need further

investigating.
2. Bank reconciliations help to safeguard cash by detecting errors on
the part of the bank and/or the business organization when
recording activities in accounts.
3. Bank reconciliations can make you aware of recording errors and
other problems more quickly by enabling you to isolate the
problem.
4. Bank reconciliations help to create stronger internal control,
whereby accountability over cash assets is greatly enhanced.
5. Bank reconciliations ensure that account balances are accurate, and
that they reflect the true financial position of the business
organization, so management can make more informed decisions
thereby making the firm profitable which eventually benefits the
corporation, management and all its employees.

CONCLUSION
One primary reason why most business doesnt employ bank
reconciliation is lack of knowledge on how to complete monthly bank
reconciliations. It is a reality that, a lot of accountants even license
accountant or a CPA dont know how to perform bank reconciliation.
Although most accountants are equipped the necessary theory behind
bank reconciliation, but some of them cannot apply it in actual practice.
The obvious reason is, some of them dont know where to start because it
is quite confusing and it is procedural that one needs to analyze. Hence,
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only few people know how to perform bank reconciliation in actual

practice.

Most

reconciliation

companies

to

their

dont

value

organization

the

importance

because

simply

they

of
are

bank
not

knowledgeable what bank reconciliation all about.

Through this study management of Valencia Rubbertex Incorporated
will finally realized the importance of this internal control tool wherein it
creates a lot of benefits and advantages to their business. Implementing
and adopting this very important internal control over cash will deter
fraud on cash account, help track the collection and disbursement
transactions, and most of all, it creates reliable companies financial
records and financial statements.
RECOMMENDATION
The following is a list of remedies that are recommended for
Valencia Rubbertex Incorporated in order that the bank reconciliations will
be employed as an effective internal control for cash.
1. Bank reconciliations should be performed monthly to compare bank
balances to balances in the cash books or general ledger cash
accounts. It could also be performed on a daily basis in accordance
with management discretion. This is done to ensure accuracy and
accountability for all cash transactions.
2. The management through the General manager should take action
to

hire

an

reconciliation.

employee
One

who

will

personnel

is

focus

to

enough

perform

the

bank

to

the

bank

do

reconciliation. A graduate of BS Accountancy is preferred but not

required as a qualification for the person who is in-charged with the
bank reconciliation.
3. The management should take action for the training of the new
employee in-charge to do the bank reconciliation.
4. Someone other than the person responsible for completing monthly
bank

reconciliations

should

monitor

Page 12

account

balances

and

statements to ensure more accurate and effective internal control

on cash.
5. Accounting manager should regularly check the work of the incharge of the bank reconciliation. Included in his checking is the
reconciling items that need to be corrected or adjusted in the
books.
6. Finance manager should regularly check the adjusted cash balance
in the bank reconciliation statement to know the actual cash
balance left in the company. He must also check the receipt and
disbursement side of both bank and book balance. And from there,
analyze the cash inflows and outflows thereby making a decision in
connection with the cash flow movements.
7. The internal auditor should regularly check the nature of the
reconciling

items

in

order

for

him

to

make

findings

and

recommendation.
8. The general manager should support this kind of internal control
system because this is for the benefit and advantage of the
company.

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